Taxation

Special Cases

Cash-Basis Accounting

Who May Use the Cash Basis of Accounting?

Persons who supply goods or provide services to final consumers who are not subject to VAT may use the cash basis of accounting. Examples include restaurants, pharmacies, and supermarkets.

To benefit from the simplified-invoice or receipt system, the following conditions must be met:

The person must meet the conditions for mandatory or voluntary VAT registration and must be registered with the tax administration.
The activity to be covered by simplified invoices or receipts must be a retail activity. All other activities remain subject to the ordinary legal obligations, particularly those under Article 38 of the law.
The nature of the business and the volume of transactions must make it impractical to issue a fully compliant invoice for every transaction.

What Is the Special Treatment?

A person using the cash basis may request special treatment from the tax administration allowing the issuance of a simplified invoice or cash receipt instead of the tax invoice required under Article 38 of the law.

A compliant tax invoice may still be issued at the customer's request, and the taxable person must retain copies of those invoices.

How Is the Special Treatment Applied?

Once the conditions are met, the taxable person must submit an application to the tax administration. The approval takes effect from the date on which it is granted.

Reference: Decision No. 294/1 dated 6 March 2002 .

Transfer of the Essential Assets of an Establishment

VAT is not due on the transfer of the assets of an establishment when the following conditions are met:

The transfer includes the assets necessary for carrying out the activity and without which the transferee could not continue operating the establishment.
Immediately after completion of the transfer, the transferee allocates the acquired assets to an activity similar to that carried out by the transferor, even when the transferee did not have an existing establishment before the transfer.
The establishment is actively operating and generating revenue on the transfer date, even if that revenue does not result in a profit.
The transferor is subject to VAT, and the transferee becomes subject to VAT automatically as a result of the transfer, unless the transferee was already subject to VAT independently of the transfer.

Claiming the Exemption

A declaration signed by both the transferor and the transferee must be submitted within one month from the date on which the transfer agreement is signed before the notary public. A copy of the agreement and an undertaking by the transferee to continue the same activity must also be submitted.

Reference: Decree No. 7298 dated 26 January 2002 concerning the transfer of the essential assets of an establishment.

Refund of VAT on Fixed Assets Acquired Before VAT Registration

To recover VAT paid on fixed assets acquired before registration, an inventory must be prepared before the registration date and a written request must be submitted within two months from the effective date of registration.

A detailed list of the assets must be attached, showing the asset type, purchase date, supplier's name, purchase invoice or customs declaration number, value, VAT paid, and the amount requested for refund.

References:

Refund of VAT Paid on Inventory Acquired Before VAT Registration

To recover VAT paid on inventory acquired before registration, an inventory must be prepared before the registration date and a written request must be submitted within three months from the effective date of registration.

A detailed inventory list must be attached, showing the type of goods, purchase date, supplier's name, purchase invoice or customs declaration number, value, VAT paid, and the amount requested for refund.

Reference: Decision No. 978/1 dated 2 August 2004 concerning the deduction of VAT paid on stock and raw materials held on the effective date of VAT registration and acquired before registration.

Refund of the Cost of a Cash Register

A refund request must be submitted to the Directorate's registry within two months from the date on which the administration's approval is obtained. The following documents must be attached:

A copy of the supplier's invoice for the cash register.
A sample receipt issued by the cash register.
A copy of the administration's approval.

The amount of VAT already deducted or refunded must also be stated. The refund may not exceed LBP 2,000,000.

References:

Article 23 of General Budget Law No. 583 of 2004 .
Decision No. 914/1 dated 16 July 2004 .

VAT Refunds for Tourists

Definition

Tourists may recover VAT paid on certain goods or property purchased in Lebanon when they intend to take those purchases with them to their country of residence.

A tourist is a natural person, whether a Lebanese person residing abroad or a foreign national, who does not carry out commercial or professional activities in Lebanon, has no permanent or temporary place of business in Lebanon, visits solely for tourism, and does not remain continuously in Lebanon for more than three months.

Conditions for a Refund

A tourist may request a refund of VAT paid on purchases made within Lebanese territory when the following conditions are met:

The purchases or goods are carried as part of the tourist's personal luggage.
The goods were purchased from a trader registered with the tax administration.
The total value of a single invoice is at least LBP 150,000.
The purchases are taken out of Lebanon within three months from the purchase date, meaning the invoice date, and are exported on the tourist's first departure from Lebanon while still within the permitted stay.
The purchases are new and have not been used in Lebanon.

Purchases and Services Listed in the Source

Services of all kinds, including hotels, telecommunications, car rental, and organized tours.
Food and beverages of all kinds, including restaurants, cafés, and supermarkets.
Fuel and tobacco.

For further information, consult the tourist VAT refund guide or contact Global Refund Lebanon SAL:

Telephone: +961-1-200380
Email: Taxfree.lb@globalrefund.com
Website: www.globalrefund.com.lb

Reference: Decree No. 7301 concerning the conditions for VAT refunds to persons not resident in Lebanon (tourists).

Non-Resident Businesspersons

Who Are Non-Resident Businesspersons?

Non-resident businesspersons and companies are natural or legal persons, whether foreign nationals or Lebanese persons residing abroad, who have no permanent place of business or permanent residence in Lebanon and whose purpose in visiting Lebanon is to organize or participate in conferences, lectures, or exhibitions.

Refund Conditions

The person is registered with the tax administration or commercial register in the country of residence or the country in which the profession is practised.
The person does not carry out any activity in Lebanon involving the supply of goods or services, whether taxable or non-taxable.

Non-resident businesspersons or companies may request a refund of VAT paid on goods or services received within Lebanese territory when the VAT paid exceeds LBP 1,000,000 during one visit or several visits in a given year.

When the VAT paid during a given year does not exceed this amount, it may not be carried forward to a subsequent year.

For further information, consult the Guide for Non-Resident Businesspersons and Decree No. 7299 .

How Is the VAT Refunded?

Non-resident businesspersons and companies may request a full refund of VAT paid in Lebanon on goods and services directly and clearly connected with the purpose of the visit.

Examples include rental fees for exhibition spaces, real-estate rental or licensing fees, the purchase or rental of equipment used exclusively for the stated purpose, hotel accommodation, and car rental.

The refund request must be submitted before the end of the sixth month of each year and must cover VAT paid during the twelve months preceding the submission date.

The application may be submitted directly by the non-resident businessperson or by an appointed representative in Lebanon.

When the refund is approved, the approved amount is paid before the end of the year in which the request was submitted.

Services Provided by Non-Residents

At least one week before carrying out any taxable transaction, a non-resident person must appoint one representative for all activities intended to be carried out in Lebanon.

The representative is jointly liable with the non-resident principal for financial obligations toward the tax administration. The administration may pursue the representative through legal means to collect amounts owed by the non-resident principal.

If no representative is appointed in Lebanon, the contracting party becomes responsible for paying the tax and related penalties, where applicable. The contracting party must withhold the amount from the payment due and remit it using a special payment notice.

A representative is not required for services performed outside Lebanon and received by a resident of Lebanon. In that case, the resident is responsible for paying VAT through the periodic return when registered for VAT, or through a special return prescribed by the tax administration when not registered.

Reference: Decree No. 7837 dated 30 April 2002 (Non-Residents) .

VAT Refunds for Embassies, Diplomatic Bodies, and International Organizations

Eligible Bodies

Eligible bodies include diplomatic missions and career consulates in Lebanon, subject to reciprocity, United Nations organizations operating in Lebanon, and international or regional organizations whose headquarters agreements with the Lebanese State provide for exemption from taxes and fees, except charges collected for specific services.

These bodies may request a refund of VAT paid on goods and services used exclusively for carrying out their official duties and activities.

Eligible Persons

Accredited foreign diplomats and career consuls residing in Lebanon, subject to reciprocity.
United Nations employees holding international passports of category F4 or above.
Employees of international organizations who enjoy diplomatic status under headquarters agreements concluded with the Lebanese State.
Technical and administrative staff of diplomatic missions and career consulates in relation to goods and materials that they may import free of customs duties, subject to reciprocity.

For technical and administrative staff, the exemption is limited to personal belongings brought into Lebanon when taking up employment with the mission and also permits the importation of one vehicle.

The persons listed above must:

Be non-Lebanese or not permanently resident in Lebanon.
Not carry out profit-making activities in Lebanon.

Family members residing with these persons in Lebanon also benefit from the right to a refund.

Eligible persons may recover VAT paid on goods and services intended exclusively for personal use, except food, non-durable consumer goods, alcohol, tobacco, mobile telephone bills and devices, petroleum products, recreational activities, and the costs of construction, general building equipment, site organization, infrastructure, renovation, repair, improvement, and building maintenance.

Reference: Decree No. 7295 dated 26 January 2002 and its amendments .

Transactions Eligible for Refund

Eligible transactions include supplies of goods and services carried out within Lebanese territory by a taxable person for the benefit of an eligible person or body, together with imports made by an eligible person or body.

Refund Conditions

The principle of reciprocity between states applies.
The value of a single invoice must be at least LBP 300,000.
The body must submit the refund request in its own name using forms prepared by the tax administration at the end of each month, no later than six months from the purchase date.
The request must be submitted through the Ministry of Foreign Affairs and Emigrants and is accepted only when certified by the Ministry.
Individuals must submit their refund requests through the body to which they belong.

The following must be attached to the refund request:

A detailed list of the amounts requested by the body for VAT paid on goods and services intended for official use.
A detailed list of the amounts requested by persons affiliated with the body for VAT paid on goods and services intended for private use.
Documents and invoices supporting the refund. These must be originals or copies certified by the body submitting the request.

Please consult the guide for embassies, diplomatic bodies, and international organizations.

Reference: Decree No. 7295 dated 26 January 2001 and its amendments .

Refunds under Article 59

Who Benefits from Refunds under Article 59?

Beneficiaries are persons carrying out certain transactions exempt from VAT under Articles 16 and 17 of the law, such as hospital services, education, medicine manufacturing, and non-profit associations.

What Does the Refund Cover?

The refund covers 100% of the VAT paid on fixed assets and current expenses.

Reference: Decree No. 7365 dated 2 February 2002 and its amendments .

How Is the Refund Obtained?

To benefit from this refund, the concerned person must apply to the VAT Directorate for a personal account.

Please consult the tax procedures and Article 59 of Law No. 379/2001 .